Using Blockchain Technology to Invest in Silver

By Michael FischerMarch 15, 20224 minutes read
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Using Blockchain Technology to Invest in Silver

With blockchain technology already a buzzword in the conversations of many investors, it’s only natural for new markets—such as silver—to begin adopting blockchain innovations. Blockchain tech is bringing precious metals markets further into the digital space.

Keep scrolling to learn how blockchain technology and silver are crossing paths. Find out how blockchain technology is being implemented for the potential benefit of silver investors.

Why use blockchain technology as a silver investor?

As a potential investor in silver, you have options. If you’re considering using a blockchain-based platform to buy physical silver, then it’s helpful to first understand how blockchain technology functions in the space. Here are some key properties of blockchain technology:

  • Efficiency: Because of the decentralized nature of blockchain technology, blockchains can efficiently collect and distribute information. Blockchains can allow silver transactions to become more automated, resulting in lower costs and more efficiency. A more efficient silver market may be more liquid, and blockchain technology can also increase the efficiency of the silver supply chain.

  • Transparency: Blockchain technology can provide information about silver supply chains, silver transactions, and silver ownership, while reducing information discrepancies. Blockchains are designed to make information more transparent, while anonymizing all personal or private information. Silver investors can view extensive transaction information via an electronic ledger system that forms the basis of blockchain tech. 

  • Security: Blockchain technology can create networks that are both decentralized and secure. The decentralized nature of blockchain technology makes it difficult for network participants to hack the blockchain. Silver investors can benefit from this higher degree of security for both purchases and sales of silver, as well as storage of the physical metal. 

How to use blockchain tech to invest in silver

You may be wondering exactly how silver investors are using blockchain technology. Keep reading to understand the many attributes of blockchain technology that are relevant to physical silver investors:

  • Real-time tracking: Want to track your silver in real time? Investors can use blockchain-enabled platforms to monitor the movements of their physical silver. Blockchain technology continually distributes information to every user of a blockchain network. 

  • Low costs: Physical silver investment platforms using blockchain technology can be operationally efficient, and pass those cost savings to investors. Blockchain-based platforms are largely automated, and eliminate any need for commission-driven sales representatives. Many blockchain based platforms do not charge fees for storage or management of investors’ assets. Furthermore, investors don’t need to pay to ship or store the physical silver when using a blockchain-based platform.

  • Direct ownership without physical possession: Investors in physical silver can leverage blockchain technology to directly and fully own the physical metal without being obligated to take physical possession. Investors retain the titles to their silver holdings and can, at any time, independently verify ownership or instruct physical delivery if desired. The need for an intermediary trust or fund is eliminated with the use of this technology.

  • Increased accessibility: Blockchain technology can make owning physical silver more accessible to more investors. Not only does blockchain tech eliminate the need to take physical ownership and can lower investors’ fees, but also the technology enables ownership of physical silver in any amount.

  • Increased data accuracy: Silver investors can potentially use blockchain technology to verify the accuracy of data collected and reported by supply chains. Blockchain tech is used to accurately register the investment grade of physical silver owned by an investor. 

  • High-quality audits: The ability of blockchain technology to efficiently generate and distribute information can increase auditors’ abilities to monitor physical silver supplies. Investors can benefit from transparent audits of physical stores of silver. 

  • Advanced security through encryption: Blockchain cryptography is used to secure investors’ titles to physical silver. Cryptographic signatures are required from all parties to a transaction to prove authenticity. Registration of the physical asset must be cryptographically signed by the entity entrusted with storage.

Pros and cons of blockchain technology for silver investors

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  • 24/7 access to assets and unlimited transactions: Blockchain technology can enable investors at any time to buy, sell, or take delivery of their silver assets.

  • Low costs compared to physical ownership: Blockchain tech can automate processes and lower the costs of buying and storing physical silver.

  • High transparency and auditability: The electronic ledger maintained by a blockchain provides an accurate log of information that anyone can view and verify.

  • Cryptographic security: Cryptographic protocols produce blockchains that are generally considered to be secure.

These are the primary drawbacks of using blockchain technology as a silver investor:

  • Investment fees: Blockchain-based platforms have low but not zero fees. You may be charged a subscription fee or a percentage fee per transaction.

  • Assets are physically stored elsewhere: Using a blockchain-based platform lets you own physical silver without taking delivery, but that also means that the silver is not in your direct physical possession. 

  • Blockchains are not completely invulnerable: Blockchains are lauded as being very secure, but are not entirely invulnerable from a technical standpoint. It’s generally difficult although not impossible to command enough resources to control a blockchain network. 

  • Physical security risks: Blockchain technology cannot address every risk associated with owning physical silver. Physical security and other risks remain even with the use of blockchain technology.

What to consider before using blockchain to invest in silver

As blockchain technology is becoming more mainstream across industry sectors, whether to use this new tech is a choice for each individual investor. You can consider the benefits of blockchain technology for investing in physical silver, but it’s also important to recognize the risks. As a responsible investor, make sure to do plenty of your own homework before making any investment decisions.

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